Marketing

Chapter 10, 11, 12, 14, 15, 18, 19

Pricing Strategy Used in firm driven barrier

Exp: penetration pricing(low cost barrier) , skimming pricing
Pricing toolkit Def: a set of firms picing tactics for the firms change a products
prices
Under TACTICAL PRICING pg 364
Ongoing stream of pricing decisions the firms makes on a daily
basis.undsisciplined use of the toolkit can lead to price waterfall
hoaaaa bestnya ><
Selling business to Divest(exit directly from the business of particular product)
other Divesting is find a buyer for which the product a good fit, and sell
the product line to the buyer the product(exp: the recipe of
certain food)
Follower Exist in early growth
They can either
-Seek Market leadership
: By Imitation-copy the leader doing but do it more effectively
: By Leapfrog-Produce better innovation product, entering
emerging market before market leader
-Settle for 2nd Place
: Be second in market because not enough resources to
compete and become market leader
-Focus on a Market Segment
: A good option for a follower that have not enough resources
compare to market leader, and it find that the selected segment
is attractive
-Exit the market
: If business sale value is higher than projected discounted
profit stream (NPV is negative, then exit market)
Life cycle in Senario 5 Maturity-but not really
maturity capon pg Senario 6 Maturity- concentrated market leaders
183 Senario 7 Maturity concentrated market follower
Senario 8 Maturity fragmented markets

Barrier in entering a Behavioural Barrier

new market :Requiring behavioural change by customers-customer takes time
(in mature market) to suit themselves with the product and takes time to switch
from other product
Economic
: Low cost strategy- impose low price to not allow other high cost
firm to enter the market
Government imposed
: regulation that prohibit other to enter some industry (Patent)
: Deregulation will cause competitors enter the market and grow
the industry
Technological Barrier
: Innovation obliterate technological barrier to growth.
: Communication technology brings price transparency
: Internet become distribution channel
Barrier in entering a Government imposed
new market : regulation that prohibit other to enter some industry
(in pioneer market) : Deregulation will cause competitors enter the market and grow
: Patent provides owner with legal monopolies for several years
 : Taxation for imported item(duty)
Product specific
: Barrier relate directly with the product(access of capital, raw
material human resources and minimum scale of operation
: will diminished by product innovation

Price A strategy plans on low profit margin for substantial time

penetration(PP period(buying market share)
Strategy) Require significant resources as the firm continually to reduce
cost and price, build capacity and grow quickly
Used to impose barrier for other firm to enter the market
Advantageous for price sensitive market and low government or
product specific barrier, customer switching cost is high, after
market for complementary product is significant

Price structuring The experience curve- graph of accumulated volume(experience)

in making, promoting, and distributing a product against unit cost
of production
Price skimming(PS) Used in first mover advantage in pioneers
PS is charging high price, even unit cost reduce, earn high margin
profit.
Can be used when
-government imposed barrier/product specific barrier are high
-customer willing to try is strong
-price insensitive
Price structuring Price strategy: the firms overall approach to settg price,the 4 critical
and regulation underpinnings of pricing decisions (warna biru)
Page ch 20, ch 21
Price affects: margins, unit volums, costs, customer value (perception)

In setting prices, firms should consider:

-perceived customer value
i) creating value
ii) measuring value : direct value investment, dollarmetric method),
perceived value analysis, economic analysis, price experiment),
iii)capturing value,
iv) price sensitivity

-costs: many firms use cost inappropriately by implementing cost-plus

approaches to setting price (cara ni TAK SAH). Cost have three proper
roles which is : birth control, death control, and profit planning

-competition: critical issue are predicting how competitor will respond

to price changes, n deciding how to respond to competitor price
reductions. Use varity price n non price actions
-starategic development/objectives: the firm should link strategic
objective ( 4 objktf)

<critical part in perceived cut value: creating measuring and capturing

value>

Importatnt approaches to pricing include:

Price discrimination-variable pricing
Dynamic pricing
Variable rate versus flat rate
Customer driven pricing
auction pricing

Setting the actual price: issues

-fees and surcharges
-promotional pricing vs steady pricing
.brand image
.diversion
.hidden cost
.poor forecasting
.time shifting
-psychological effect pricing
-pricing bases

Setting price for a new product:

Correct :
Determine max price,minimum p
Set priced based- strategic objtve, likely comptatve respon

Incorrect way:
Cost-plus, comptatve equivalence

SPECIAL topics in setting prices:

-complementary product pricing
-gray market pricing
-pay what u want pricing
-topsy turvy pricing
 -transfer pricing

STARATEGIC OBJECTIVE:
Whatever it is, tujuannya adalah untk
MAX growth in volume and/or market share
MAX profitability
MAX Cash flow okayy
Introduction in Pioneers(usually only one in market)
Product life cycle -must lay foundation for achieving market leadership and
profitability
-develop appropriate market strategy to pursue future PLC.
-demonstrate value to target customer and reduce market
uncertainty that the product is short-term wonder.
-build marketing organization and distribution channel
Not generate profit, and incur high cost in R&D.
Marketing expense is high
Cash flow negative
Get loss in operating income
Subsidise new product with profit of old successful product
Small firm need outsource of financing by issuing IPO, and will
bought by
: angel investor-someone who provide startup funding (high risk
taker)
: Venture capitalise provide financial backup when opportunity
start to show promise. (not high risk taker)

BCG Matrix Star-Bintang Problem Child-budak bermasalah

By Boston Dominant position in high (Lottery Ticket, Question Mrks,
Consulting growth market
Group Consume high investment
Represent as it need high cash to
product or finance its growth
business If firm able to retain
market share, profit and
market share will improve
and turn into cash cow.
If cut back investment too
early, then the firm
doomed.(Become Dogs)
Cash cow-Lembu berduit
Low cost
Premium price
Wildcats)
Grow with high
investment consumption
Risky as It doesnt
promise future profit
If let the problem child to
grow with the markets
move, it will turn into
Dogs
Only two suitable option,
which is
-Double the investment
-quit immediately or
gradually.
Dogs-Anjing
High cost compare to
leader
 Low investment, low
growth
Highly profitable, be firm
primary cash source
Demand pattern change
threaten cash cow
Over-milk(no more
investment in R&D, just
solely depend on current
product) will cause it dry-
up(trails in technology,
and loss in market
position)
Price lower than leader
Unprofitable, and always
the management main
attention
A firm can
-developing new segment
to strengthen their
position
-refreshing product(add
new feature to current
product)
-Maximizing shorterm
cash flow
-Use kennel
strategy( combine dogs
and become a new
offer)(gabung anjing2 dan
jadi anjing baru)

Harvest strategy Why harvest?

Change in firms strategy
Desire to avoid specific competitors
Restriction from governmental regulation
Requirement of Investment for the product too high
New technology cause product obsolete
How to Harvest?
Fast Harvesting
-divest product and get immediate cash
Slow Harvesting
-simplifying product line
-Minimize further investment
 -Raise price
Brand association -The meanings the brand has for individual people
Brand equity Brand equity= a set of brand asset and liabilities linked to a brand,its
name, symbol, that add to or subtract from the value provided by a
product or services to a firm/customer
Customer brand quity nama glamour CBE. Ada dua jenis
pre-purchase equity dan post purchase equity
>pre-purchase equity: what customer believe b4 purchase reduces
customer search cost and purchase risks. Contoh: airasia,jetstar, tiger =
lowercost airlines
>post purchase (after purchase): enhances the customers consumption
experience= bila dh beli kita dapat valuenya. Contoh beli kereta , kereta
tu DAPAT BERFUNGSI untuk bawa kita family g bercuti, suka suki. Note
that it give u ECONOMIC VALUE (low cost), PSCHOLOGICAL VALUE (life
status, GLAMOUR)

Firm brand equity nama glamour FBE= resulted when

customer responses to firm actions n links directly to CBE

The greater FBE the better:

.can set high p
.easily introduce similarly branded item in differ product classes n
markets
-use cros-selling to encourage existing customer to purchase in differ
product classes
.generate leverage in distribution channels by securing more n better
shelf pack space n more favourable transaction terms
-raise entrt barrier for competitors
-exploit licencing oppurtunities

Brand awareness -the knowledge of the product among the people

-firm must educate their customer to let the customer know the
existence of product in market.
Brand image -comprise association the people actually hold
-overall sum of brand association
Brand identity -what the firm wants the brand to mean
-comprise associations the firm wants people to hold
-blueprint for marketing strategy
Leveraging pg 208 Aka brand broadening occurs when the firm undertakes brand
extension. Attaching brand an existing brand to a different product
(form/classes) to address new opportunity

Example: Harley Davidson restaurant (origin product motor)

 -automatic get awareness
-b4 that must consider potential oppurtunities n obstacles
-several branding issues

After finish branding, addressed opportunity, obstacles, n several issues,

brand must meet TWO BASELINE
>the brand must have strong positive associations
>brand associations and the product extension should not be
incongruous

Brand extension tend to fail when:

Associations between the brand extension r not obvious
-the brand has a unique image n associations that do not transfer
-the new product form (class) has a dominant competitor
-the positioning is confiusing/inconsistent
-the extensions quality does not match customer expectation for the
brand

Brand health Brand health check is done by using metrics to indicating Firm
Brand Equity change
The typical check can be done by using balanced scorecard
approach.

Purchasing and Market No. and type of customer buy the
sale breath brand
-from accounting Market depth Extent of repeat purchase
and Customer Market share Brands sales in percentage of
responds total market sale
management
-from industry-
focused research
supplier
Perceptual Awareness Degree of brand awareness
-from survey Brand image Brand association congruence
research with brand identity
Quality Perception of quality(by blind
test)
Uniqueness Extent of differentiation from
competitors
Value Extent of brand provide good
value in money
Marketing Advertising Market/advertising share
support Advertising/marketing
-accounting and spending
business Distribution Distribution coverage
intelligent Retail goods, quality of
system. display, especially in key
 - from industry- acc
focused research Relative price Price compare to competitive
supplier brand
Profitability Profit Profit from the brand
-accounting
EVA-Economic value added of the
brand
Multiple brand Also known as House of Brands strategy
Uses multiple brand for multiple product
Seek loyalty of customer to particular brand, but not the parent
brand
Contra to umbrella branding, which emphasize monolithic brand
for several product
Brand extension Attaching an existing brand to different product(form/ class) to
(brand leveraging) address new opportunity
Exp: Adidas clothes, Adidas perfume
The product form gain automatic brand awareness
Reduce launch cost and increase profit
Considerations need to be take are
Opportunity and obstacles
-demand of the product
-able to compete?
-able to distribute?
-able to satisfy customer? (potential demand)
-enough resources?
-got other competency that makes the firm better?

Branding issue-concern on brand association

-are both product concept and product feature fit the original
one?
-do brand association will transfer to the new product?
-will brand association of new product will back transfer to old
product
-how corporate brand relates to these association?
Brand extension must
-have strong positive association
-brand association and extension must not congruous
Failure of brand extension cause by
-association of brand and extension not obvious
-association not transfer
-have dominant competitors
-positioning is confusing
-quality not match with expectation

Collection of To enable the resource allocated across all product in balance

product(portfolio) manner
The portfolio approach enable new product being financed by old
 matured product, until the new product matured, and the profit
generated again finance the coming new product in future.
Imbalance portfolio put investor in risk
Too many new product create shortage, too many old product
create surplus
Balance portfolio brings wealth to shareholder.
Successful product strategy is setting objective and allowing
resources allocation across all product.
Product marketing
strategy

Financial analysis ROI Profit/Investment (based on acc data)

approach Payback Time to payback Initial investment
NPV The dollar value of opportunity: Discount all inflow and
outflow by predetermined factor-(cost of capital)
IRR The discount rate that equalized cash inflows and cash
outflow
Economic The opportunity annual profit less an explicit charge for
Profit capital
Portfolio analysis One of the strategic planning process
Model Additional tool for financial analysis in allocating resources
There are two PA methods: Growth share matrix and multifactor
matrix

Variable FA PA
General Financial/budget Market and competitive oriented
approach oriented
Investme Technologies/faciliti Product/market/customers/applica
nt es tion
decision
focus
Key Derived profit and Market and competitive factors
concern cash flow no. underlying the financial no.
Tools Capital budgeting Growth-share and multifactor
matrix
Typical ROI, payback, NPV, Market-size, growth, competitive
measure IRR, EVA strength

The multifactor matrix: plot market attractiveness against

business strength
BCG matrix has only 2 measure, which is market growth and rms,
while multifactor further redefine it into market attractiveness
and business strength
Multifactor matrix address the realism issue by using several
criteria than embraces many factors which BCG matrix omit.
Comparison BCG matrix/Growth Multifactor matrix
share matrix
Ability in manipulate Hard Easy
entries
Accommodates to Not well Yes
new business
Application across Single set of criteria Multiple set of
the firm criteria
Explicit consideration No Yes, if required
of risk
Appropriate for No Yes
fragmented market
Communicability Simple Complex
 Criteria Limited but Unlimited but
unambiguous disputable
Implementability Easy complex
Measure Objective Highly subjective
Realism May be limited May have more
Sensitivity to basic Yes Yes
assumption
Sensitivity to market Yes Yes
definition
Underlying focus Cash flow ROI

Innovation Sustaining technology/innovation

-spawn innovation that improve established product on
performance dimensions valued by major customer
Disruptive technology/innovation
-offer new and very different value proposition
-initially the new innovation may look like coward in market, but
when it has its cost benefit ratio improved surpass the old
technology, it will appeal in market

Culture lock-in coz business committed in to an existing way of

doing business and miss disruptive innovation
Disruptive and sustaining innovation are differ and need to do in
different organization unit
How to foster innovation?
Market selection as high growth market stimulate innovation
Organization: Supportive culture that foster innovation/formal
structure that foster R&D
R&D need to be done and not hesitating to spend money in R&D
Business objective and funding are critical in innovation issue
Value proposition. Definition: the heart of positioning, postioning is the heart of strategy.
PG 168 Based on 4: fuctional, pschychological, economic value and related
benefits it offer to customer.
The v.p defines how he firms gains cust n beats competitors (related
terms r key buying incentive, differentiated core benefit, core strategy,
unique selling proposition, but v.p best captres the concept.

-the firm should base it v.p on the PRINCIPLE OF CUST AND DIFFERENTIAL
.focus on satisfying important cust needs
.attempt to meet these neeed better than competitors and where
possible
.offer customer benefits n values that r difficult fotr competitor to
imitate.

Example: iPod= take the music with u . Loreal= bcoz u worth it

New product New product innovation associated closely to culture of the firm
development Problem arise when product developer are indifferent to
marketability of their product, can be solved by using market
oriented criteria in development process
Basic technology Aim at disruptive innovation
research
Applied Uses basic technology to develop new
technologies product
research
Market-focused Focus on marketable product, often by
development improving ease of use or developing
complementary product
Market tinkering Makes minor modification on current
product
///Product 34% of population
adoption by Pragmatists
customer/// Motivated by current problem and make decision deliberately
Early majority Influenced by early adopters
///Product 34 percent of the population
adoption by Conservatives
customer/// A sceptical group that adopts only when half the population has
Late majority adopted. Tend to be price sensitive
Direct marketing DIRECT
Transaction Product examination- consumer cannot physically examine
product before purchase, but some direct markets built free
return their value proposition.
Time delay- typically several days elapse between purchase and
delivery

INDIRECT
Mass media
Direct mail
Telemarketing (telesales)
Mass -advertising
Communication -direct marketing
-packaging
-publicity & public relation (P&PR)
-sales promotion
Product placement
Trade shows
Direct & indirect DIRECT (supplier manage contact with customer)
customers 1. Face to face
2. Direct sales using direct marketing, mass media and
telemarketing /telesales
3. Internet
4. Specialized retail distribution wholly owned/francaised

INDIRECT (intermediaries like distribution,whosales & retailer play major

 role intranferring product from supplier to customer)
1. Agent , manufacturers representatives & brokers
2. Banks and financial instituition
3. Distributor, wholesales and retailers
4. Independent warehouse
5. Package delivery & transportation companies
Market strategy Customer target. Decision makers and influences for the retailers
product.
Competitor targets. Other options for customers
Value proposition. Why customer should buy from firm
Reason to believe. Why should customers believe the retailer can deliver
on its value proposition?
Customer Get customer to the store- promotion activities with different objective.
promotion Help customer around the store-This is challenging. Example: lighting,
music, and signed
Selective -between intensive and exclusive distribution
distribution -too many outlet to excessive competititon
- too few outlet & firm product are difficult to find
-making careful outlet decision
Intensive -product should be easily available
distribution -firms maximizas number of outlet where customer buy
-critical strategic thust for firms
Exclusive -customer are willing to search & travel
distribution -firm careful in selected outlet
Horizontal
distribution

Conflict (power in Strategic conflict initiated by DOWNSTREAM customer

distribution) -end user customer grow and desire direct to supplier relationship
-distribution become large and change the power balance
-new buying influence enter the distribution channel
Strategic conflict initiated by UPSTREAM supplier
-to reach end user customer more efficiently,the supplier goes direct
-for better market penetration, the supplier adds new distribution and/or
distribution
Product terms Definition od PRODUCT: sometimes refer to core offer,both physical
xjumpa products n services. We use this shorthand in much of the book. But
tangible products can be TOUCHED, WORN, KICKED, OR SAT UPON: A
SERVICE CANNOT!

Product form A useful categorization: of products offering

1)a group of product offered by competing suppliers that serve a subset

Product class acustomer needs in roughly similar manner. Bawah industry
entertainment ada product theatre, televisyen, dvd

Product line Several product form comprise each product class.comedy, science
fiction,horror are product of theatrical movies product class
Product item
A group of related products that a single firm offers

A subset of product item is uniquely identified, like having a spesifc

colorand size
Modern retailing Display & sell product for customer.
trend
Product assortment- the retailer choose the set of good and services to
offer consumers, hence providing choice value
Customer experience-retailing is aservice , conforming to the various
service characteristics
Accessibility-ease of accessing the store is often critical for cunsumers.
Time and place convenience are the watchword.

Wholesaler channel Primary buy , take title to,store and physically handle goods in large
funtion quantities.

Value to supplier.
-market access
-information on customer requirement

Value to customer.
-one stop shopping
-more effective procurement
-enhanced assortments
-consulting